Modelling mortality: are we heading in the right direction?

O’hare, Colin; Li, Youwei

Abstract

Predicting life expectancy has become of upmost importance in society. Pension providers, insurance companies, government bodies and individuals in the developed world have a vested interest in understanding how long people will live for. This desire to better understand life expectancy has resulted in an explosion of stochastic mortality models many of which identify linear trends in mortality rates by time. In making use of such models for forecasting purposes, we rely on the assumption that the direction of the linear trend (determined from the data used for fitting purposes) will not change in the future, recent literature has started to question this assumption. In this article, we carry out a comprehensive investigation of these types of models using male and female data from 30 countries and using the theory of structural breaks to identify changes in the extracted trends by time. We find that structural breaks are present in a substantial number of cases, that they are more prevalent in male data than in female data, that the introduction of additional period factors into the model reduces their presence, and that allowing for changes in the trend improves the fit and forecast substantially.

Citation

O’hare, C., & Li, Y. (2017). Modelling mortality: are we heading in the right direction?. Applied economics, 49(2), 170-187. https://doi.org/10.1080/00036846.2016.1192278

• Journal Article Type: Article
• Acceptance Date: May 8, 2016
• Online Publication Date: Jun 7, 2016
• Publication Date: Jan 8, 2017
• Deposit Date: Mar 19, 2019
• Journal: Applied Economics
• Print ISSN: 0003-6846
• Electronic ISSN: 1466-4283
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 49
• Issue: 2
• Pages: 170-187
• DOI: https://doi.org/10.1080/00036846.2016.1192278
• Keywords: Mortality; Stochastic models; Structural breaks; Forecasting
• Public URL: https://hull-repository.worktribe.com/output/1113403
• Publisher URL: https://www.tandfonline.com/doi/abs/10.1080/00036846.2016.1192278
• Related Public URLs: https://pureadmin.qub.ac.uk/ws/portalfiles/portal/37666343/structural_breaks_international_OL_for_AE.pdf
• Additional Information: Peer Review Statement: The publishing and review policy for this title is described in its Aims & Scope.; Aim & Scope: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=raec20